Is the iPod the new Mac?

The next seismic shift in the digital music industry could be about to shake.

There is an interesting and perceptive analysis of the iPod/iTunes phenomenon in the Australian newspaper The Age. Business writer Alan Kohler posits that Apple's iTunes Store is the most dominant retailer in history. He credits the elegant design of the iPod, the closed, proprietary nature of file downloads and the desperation of entertainment companies to protect their business model from free file-sharing, which led them, he suspects, to make lopsided distribution deals with Apple. Those distribution deals, the details of which Apple keeps secret, make it impossible to know company's profit margin for music sales.

The availability of video now on the iTunes store leads Kohler to conclude that DVDs are as doomed as CDs as a storage medium.

But, he wonders also if the aforementioned closed system could doom the iPod to the same fate as the Mac.

The key is the device — the beautiful iPod — and the simplicity of buying stuff through iTunes, which is why Apple is becoming such a powerful retailer.

That is, until Microsoft and/or Google come along, which will be soon. The shock troops for Microsoft's victory over Apple in personal computers in the 1980s were Intel, Compaq, IBM, Dell, Toshiba and so on — that is the chip manufacturer and the cheap PC makers that licensed the Windows operating system.

With digital music and video it will be Nokia, Samsung, Motorola and Sony Ericsson — the mobile phone manufacturers.

This year they will start releasing phones with the same storage as iPods — up to 30 gigabytes. iPods themselves will have to become phones.

Microsoft's software will power the new generation of phone/music players, and the business of selling digital songs and TV shows will open up. Google will probably run the most popular online store, but there will be thousands.

The iPod/iTunes system will move into a niche with Macintosh computers because Steve Jobs has again stuck with closed architecture and total control. This will happen quickly because mobile phones are being turned over about every year.

There was a good piece in the New York Times a few months ago about the frustrations iPod owners feel when trying to address customer service issues with Apple. The company, the paper writes, fails the customer service test in a significant way, especially when it comes to repairs.

One example of Apple's iPod-related customer service issues comes to mind my mind from the days before I owned an iPod. In fact, it is one of the reasons I waited as long as I did to get one.

About a year after the iPod emerged as the best-ever MP3 player (remember that it was by no means the first), owners came to realize that there was a point at which the thing could no longer be recharged. People who called Apple to complain were told that the best solution was to buy another iPod. The company was trying, in effect, to convince consumers that this $300 electronic appliance was disposable. The argument was not well-received. There was a lawsuit. One result is that now, when your iPod battery goes belly up, you can ship it back to Apple and have them replace the battery for a $69 fee.

I do not think it is radical to suggest that almost any company can do a better job at customer service than the example cited above.

The Times quoted an industry expert as saying that Apple's dominance in the digital music arena would last precisely as long as its platform remained the most convenient one for music lovers to use.

This is, in fact, where the real threat to Apple lies. As Kohler points out in The Age, cell phones running Microsoft software soon will include music storage to rival the large-capacity iPod. A few months ago, there was a supposed big deal about the first iTunes cell phone. It could hold 100 songs. One-hundred songs. Please.

The great appeal of a cell-phone digital music player will be the ability to simplify your life and reduce the amount of stuff you have to carry. Who really likes lugging around a cell-phone and an iPod? I don't. If I could download a week's worth of Air America podcasts onto my mobile phone, my iPod would become obsolete immediately.

Watch out, Apple. It's been a great run, but if you don't develop the ability to see over the horizon, the best case scenario is that you have the next Mac on your hands. You could end up with the next BetaMax.